New details and a behind-the-scenes look at the implementation of Proposition 13, the early days of California’s unitary wars, and tax policy development with the publication of David R. Doerr’s 738-page oral history interview with the California State Archives.
Doerr, who served as CalTax’s chief tax consultant from August 15, 1987, until his death on June 15, 2022, came to Sacramento in 1959 to study government as part of a new legislative fellowship program (later known as the Jesse M. Unruh Fellowship). This was a turning point for the Legislature, as it was quickly becoming a professional, full-time organization that would begin to rely on committee staff.
By 1963, Doerr had become chief consultant to the Assembly Revenue and Taxation Committee, guiding tax policy development for lawmakers and gubernatorial administrations. He remained in the important post until he joined CalTax.
Doerr was approached by the State Archives in 1990 to participate in the oral history interview program. During the course of 11 interview sessions, each lasting two to three hours, he was interviewed by University of California at Berkeley history program director Carole Hinke.
Some excerpts:
- The Start of Unitary Reform. “The Franchise Tax Board is upping the estimates of the revenue loss from unitary reform because they see how close we came to passing the bill. It’s going to hurt revenue collections. Nobody wants to do this. Further, there is a court case now. The issue got to the Supreme Court. Container. This is the landmark case. The U.S. Supreme Court – this is 1983, early ’83 – says in a, I think it was a 5-4 vote, it’s constitutional for California to go overseas and include worldwide income in apportioning the tax base. A 5-4 vote. Curiously enough, the Reagan administration had not taken a position. The solicitor general had not come in with an amicus brief. So, this decision, then, really stirs up the troops. Absolutely. The British government and [Prime Minister] Margaret Thatcher are all over President Reagan. The British parliament passes what they call a retaliatory act. They were going to retaliate against American corporations unless California changes its law. We’re going to have a tax war over California’s tax policies. So, the president establishes what they call a working group of business, U.S. officials, states, to work out the solution to the problem. Charles McClure, who is a professor at Stanford, is a staff person assigned to this group, and the governor is a member: Governor Deukmejian. They had a number of meetings and came to no conclusion. They agreed to disagree. The states offer one suggestion businesses don’t like, businesses opt for another. So, they just put out various options. Yet, the U.S. government is putting all this pressure on California now to do something. Meanwhile, the Franchise Tax Board is being attacked more and more for these estimates, so that the California Manufacturing Association hires Touche Ross [and Company] to try and do estimates. The FTB hires its own experts to try and say their estimates are correct. So, we get into the big revenue numbers war.”
- Origin of California’s Water’s-Edge Election. “Well, we’d been listening to everybody. We wanted to find a solution. I went home and thought about it, and came up with some of these ideas, based on one, the Williamson Act, which we adopted in the sixties, and the 10-year election. I understood the dividend issue. I’ve been through the other dividend issue. I understood what some of the problems were, and decided that a dividend exclusion was a reasonably fair compromise. Based on all the information I’ve had over the years on the dividend issue, I could obviously recommend that that would be fair. We just sat down and put the numbers together, and it was the right program at the right time; everybody was ready to compromise at that time. So, we trotted out this little plan. Everybody said, ‘Yes.’”
- Why the Voters Approved California’s Property Tax Limitation Initiative, Proposition 13 of 1978. “I’ve always contended, and I’ll do so to my dying day, the reason that people voted for Prop. 13 was not the tax rollback so much. It was the control on assessments, because that was the problem we’d identified as far back as 1975. People did not want to see these huge jumps in assessments. That was what was bringing people out of the woodwork. Prop.13 said, ‘Your assessment stays there, except it goes up 2 percent a year, unless you move.’ When you’re buying a new house, you can buy what you can afford, and you’ll know what your assessment is. That was what was popular.”
- The Legislature Considers Not Implementing Proposition 13. “We had started working on the implementation about a couple of weeks before the election. I might say that there was a wide range of alternatives suggested. Some of these things were being seriously considered. They ranged from go to court to knock it out to do nothing. The Legislature would say, ‘County, local government, it’s your problem.’ The state’s in effect going to stay out of it. In fact, the state would have made some money, because as you reduce property taxes, you reduce the deduction of property taxes from the income tax. So, the state would have received more revenue. But part of that, and this was a very serious alternative – I think this was the big debate that went on during the final days before the passage – would we try and implement it, try and make it work, or just let it blow up? There was a substantial number of legislators who favored the latter. In fact, I remember talking to [Assembly Member] Art Agnos, who is now the mayor of San Francisco. He said, ‘We just ought to let this thing blow up. We’ll just show people what a dumb thing it was, and then that will be the end of this whole movement. And then we can come back and put a repealer on the ballot. Just let all these cuts take place. Blood in the street.’ They called it the ‘blood in the streets’ theory. ‘We’ll just let the blood run in the streets, let chaos ensue, and that will destroy Gann, Jarvis, 13, that whole movement.’ There were a number of other legislators who thought that that would be the best way in the long run for the state to deal with it. They made the point that if you made it work, then the public would say, ‘Hey, this is great.’ You would create icons out of these people, and it would go on, and you would continue to have this kind of thing. Which you did, because two years later Jarvis came back with a proposal to cut the income tax in half, and then the voters abolished the inheritance tax and it just kind of went on and on. So that was very seriously considered. There was a great deal of debate on whether the Legislature ought to do that. It was finally rejected, because Leo McCarthy said that wasn’t responsible. The legislators had a responsibility to try and make the government work, and they couldn’t consciously support anarchy. But there was a lot of discussion of a very serious alternative.”
The full interview can be accessed on the CalTax website.